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Economists, Lobbyists Fight Over Whether Pennies Make Sense

June 17, 1990

STATE COLLEGE, Pa. (AP) _ Frank Orloski didn’t believe he was taking a stand in the debate over whether to eliminate the penny. But when he looked at the pricing policy of his 36 Quik Mart convenience stores and service stations, he realized he had already put his two cents in.

″In most circumstances, our prices either end with a nine or a five or a zero,″ Orloski said last week. ″When we price most of our merchandise, we either make it so customers get just one penny back or none. So I guess subconsciously, we do take a stand.″

The Senate Banking Committee on Wednesday will hear from economists and retailers on whether the United States should continue minting a 1-cent piece. If the bill becomes law, cash transactions would be rounded to the nearest nickel.

Jim Benfield, a spokesman for a collection of groups whose main goal is a workable dollar coin, points to people like Orloski in illustrating the short shrift the penny gets and deserves.

″Forty-three percent of all coins required for small transactions are pennies,″ said Benfield, a spokesman for the Washington-based Coin Coalition. The figure is based on the minimum number of coins needed to make every change combination from 1 to 99 cents.

Members of the Coin Coalition contend the United States loses $22 million a year in making change. The figure is based on 10 billion cash transactions yearly and a cashier wasting two seconds per transaction fishing for pennies.

That adds up to 20 billion seconds, or 5.5 million hours. At $4 an hour for the average clerk, the total loss comes to $22 million.

Also, if the penny were eliminated, cash register drawers would have room for the dollar coins the Coin Coalition backs.

To help his customers, Orloski has small containers of pennies at the cash registers of half his northeastern Pennsylvania stores, a trend started by tobacco companies in the 1980s as point-of-purchase advertising.

If people don’t have exact change, they’re encouraged to dip in. If they have extra change on a future trip, they’re encouraged to return the favor.

″They’re used. It makes it easier for everyone,″ said Orloski of Wilkes- Barre.

Raymond Lombra, a Penn State economist who, like Benfield, will testify before the banking committee, defends the penny.

″The incidence of prices ending in nine or any odd digit is no accident,″ Lombra said. ″To the average customer, a 99-cent loaf of bread appears to cost a lot less than a $1 loaf of bread.″

Any money saved on clerks’ wages would be offset if each adult had one transaction rounded up per day, Lombra said. He said it would effectively impose a ″rounding tax″ of $3.50 per adult per year.

For the nation’s 175 million adults, the cost would exceed $600 million. And with government payments tied to the consumer price index, the rounding tax could increase government spending $1.5 billion in five years, Lombra said.

″There’s more to it than getting rid of those jars of pennies that have accumulated in our homes,″ he said.

The Mint makes more than 10 billion pennies a year, more than all other U.S. coins combined. Eliminating the penny would eliminate the argument that the Mint doesn’t have the capacity to produce new dollar coins.

Pennies are made primarily of zinc, and the zinc industry partly funds the group that hired Lombra to do research. The new dollar coins would be mostly copper. The copper industry backs Benfield’s group.

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